The party's winding up for insurers

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A combination of rising premiums, a low level of claims and high
investment returns meant the 2004 financial year provided almost
perfect profitability conditions for general insurance companies -
but the industry does not expect this to recur in 2005 and
2006.

A survey of the 2004 profit results of major general insurers
conducted jointly by Deloitte and JP Morgan, and forecast results
for 2005 and 2006, indicate a softening of premiums due to
increased competition and higher claims, as good weather conditions
are expected to return to a more normal pattern.

But he warned: "The findings of our survey suggest it may be
difficult for the industry to record continued profit growth at
these levels, given that the conditions that created these results
not only need to persist but, by definition, need to improve."

Colin Brigstock , lead partner of Deloitte Insurance Industry
Group, said that the 2004 conditions were an exception to what
could be expected over the medium to longer term.

The survey was supported by more than 85 per cent of
underwriters and brokers, as measured by premium revenue.

The respondents expect 2005 personal lines premiums to rise by 2
per cent on average, while commercial lines premiums are expected
to drop by 4 per cent this year and 2 per cent in 2006. Commercial
lines include fire, commercial vehicle insurance, public and
product liability, professional indemnity and directors' and
officers' insurance, and workers' compensation insurance in WA,
Tasmania, Northern Territory and the ACT.

Some 60 per cent of respondents expect no change in claims
frequency, 28 per cent expect a deterioration and only 12 per cent
expect an improvement.

Mr Fitzgerald said: "All of the data collected in the survey
points to a deterioration in profitability over the next few years.
While the extent of this deterioration may not be significant, and
insurers will still be generating healthy returns on capital, it
will nevertheless result in flat if not negative earnings
momentum."

The insurers' main profitability measure is the combined ratio -
consisting of premiums and investment earnings less claims and
expenses. It is forecast to deteriorate by nearly 2 per cent in
2005 from 89.8 per cent to 91.5 per cent.

Deloitte and JP Morgan noted that increased competition and its
threat to premium rates were nominated as a critical issue, with 79
per cent of the industry now carrying surplus capital.